Money Market Rates Ease, Liquidity Deficit Expands

Money Market Rates Ease, Liquidity Deficit Expands

Money market rates eased despite tight liquidity in the financial system. The short-term benchmark interest rate declined as banks extended borrowing actions at the Central Bank of Nigeria’s (CBN) Standing Lending Facility (SLF).

Borrowing from the window has become the norm for smaller banks, while some cash-rich lenders play hard at the standing deposit facility to lodge excess liquidity.

With the numbers of primary market auctions easing gradually as the year runs to an end, market analysts are anticipating a liquidity boost from maturing instruments.

On Wednesday, the Nigerian Interbank Offered Rate (NIBOR) displayed mixed trends across maturities, according to Cowry Asset Management Limited.

Data from the FMDQ platform revealed the short-term benchmark interest rates ahead of Federal Accounts Allocation Committee credit inflows.

Information from the FMDQ platform showed that the open repo rate nosedived by 20 basis points to settle at 32.13% on the day. Also, the overnight lending rate declined by 8 basis points to settle at 32.67% in the absence of significant inflows.

System liquidity continued to be negative but experienced some relief as statutory revenue inflows helped alleviate the illiquidity, AIICO Capital Limited said in a note.

Generally, interbank rates remained at double digits high due to the federal Government of Nigerian (FGN) bond auction settlement, FX intervention settlement, and CRR activities.

Today, debits worth N263.21 billion for bond auction settlement expanded the deficit in the banking system by 13%, opening at N1.02 trillion, TrustBanc Financial Group said in a note.

Financial markets analysts expect the deficit trend to persist, with funding rates likely to be above 30%. #Money Market Rates Ease, Liquidity Deficit Expands Interbank Rates Slow as Remita, FAAC Credits Boost Liquidity